Case study:
For example, say you make $4,000 a month and spend $400 on a monthly car payment, $400 on your credit card bill and $800 on rent. This gives you a front-end DTI of 20% and a back-end ratio of 40%.
There’s a good chance you would be approved for a qualified mortgage, but the rate you’ll get depends on your lender’s preference for a front- or back-end ratio. For example, your front-end ratio could fall under the 28% cutoff, but you might not get the best rate if your back-end ratio exceeds 36%.